While is wasn’t the first crowdfunded startup to trace its origin story to a college dorm room, TerraCycle may be the only one that’s turning our trash into an investment opportunity. The company with its roots in a Princeton college dorm room in 2002 is gaining traction among alternative equity crowdfunding watchers eyeing the low minimum set to invest in TerraCycle stock.
TerraCycle has established a network of third-party logistics providers and facilities to convert collected waste into raw materials that are then sold to and used by manufacturers to create new products.
It captures the waste streams that most of us contribute to but probably never thought could be turned into profitable raw materials: potato chip bags, coffee capsules, cigarette butts, beauty and oral care disposables, child car seats, disposable contact lenses and packaging. The list is seemingly endless.
The recycling innovator is raising up to $25 million on the StartEngine crowdfunding platform. The share price is $100 with minimum investment of seven shares, or $700. There’s no accredited investor requirement.
The company is already generating significant revenue, $27.1 million in 2019, up 35% from 2018. The company also paid the second of its expected once-a-year dividend, $2.61 per share, which represents a distribution of 50% of after-tax income per share.
Partnering With Big Names
A key factor in TerraCycle’s success so far has been its strategy of partnering with big-name consumer products manufacturers and retailers. While the company acknowledges that it is generally cheaper to throw waste into a landfill rather than recycle it, its waste collection process is gaining in efficiencies that enables it to work with those partners and approach a circular economy.
They use a partnership with Procter & Gamble’s (NYSE:PG) Tide detergent brand to illustrate the process. Together, they created locations to collect Tide packaging where local recycling solutions are limited or simply not available.
From that point, the partners created a process for cleaning and melting the post-consumer detergent packaging into hard plastic that can be remolded to make new products. In the end, Tide has a source of recycled colored plastic.
Staying in the Loop
TerraCycle now wants to help its partners and customers get to a zero-waste situation. It has launched its Loop system where the containers for consumer products are designed to be reused. Products as diverse as mayonnaise, hand soap and orange juice now come in multi-use containers.
How’s it work? Customers buy products through the online Loop store, and pay a deposit for each container (anywhere from 25 cents to $10, depending on the brand and product). The order is shipping in a reusable tote bag, which doubles as the “recycling bin” when the product containers are empty; UPS picks the tote.
With the deposit, customers are effectively “borrowing” the packaging, which then gets professionally cleaned and reused when it is emptied. Unlike the volume of cardboard boxes hold your Amazon (NASDAQ:AMZN) order, the Loop tote enables waste-free delivery.
As of early August, the Loop store website, displaying logos from Walgreens (NASDAQ:WBA) and Kroger (NYSE:KR), offered nearly 150 beauty, grocery, household, and health/personal care items. These included metal reusable 14-oz metal containers full of Haagen-Dazs ice cream and recyclable Gillette razor blade refills.
Why Invest in TerraCycle Stock?
As is often the case with equity crowdfunding opportunities, the rationale behind a decision to invest in TerraCycle stock goes beyond potential financial gains.
While the world’s global money managers struggle with how to conform to demands for better environmental, social and governance behaviors and CEOs juggle with so-called “stakeholder” capitalism, TerraCycle presents an opportunity to invest in a disruptive, revolutionary idea.
The company shows that recycling alone is not the answer and have created circular economy that stands in contrast to the linear one that filled millions of acres of landfills. Via equity crowdfunding, investors can put their money behind the future of consumption.
Still, it is an investment, and not all unicorns and rainbows. Be aware that the fund raising is a Reg A+ offering, so it has some investment quirks that differ from other forms of crowdfunding. These include how much money can be raised through equity crowdfunding, state-by-state provisions, the amount of Securities and Exchange Commission coordination required before the offering and the visibility into company financials.
Robert Lakin is a veteran financial writer and editor, following fintech, agtech and property tech startups. He was previously emerging markets editor for Bloomberg News in Tel Aviv. He is a contributor to the Powered by Battery blog. As of this writing, Robert does not own any of the aforementioned securities.
Investing through equity and real estate crowdfunding or asset tokenization requires a high degree of risk tolerance. Despite what individual companies may promise, there’s always the chance of losing a portion, or the entirety, of your investment. These risks include:
1) Greater chance of failure
2) Risk of fraudulent activity
3) Lack of liquidity
4) Economic downturns
5) Dearth of investor education
Read more: Private Investing Risks